What Type of Insurance Does a Nonprofit Organization Need?

Nonprofits operate on a very tight budget, and one unexpected expense could be financially devastating. This is why it’s so important that nonprofit organizations understand the types of insurance they need, and what kind of coverage may be missing from their current policies.

The answer to what type of insurance does a nonprofit organization need will vary from one organization to the next, as each has unique needs and risks. However, the bare essentials include general liability insurance and directors and officers insurance (D&O). Many insurers offer a business owner’s policy (BOP) that bundles commercial property insurance with professional liability insurance, usually at a lower rate than purchasing each policy separately.

General liability insurance, also known as commercial general liability, protects nonprofit organizations from accidents that occur on the nonprofit’s property or when an event is taking place offsite. The influx of people that nonprofits see in one day – from volunteers to vendors and customers – creates the opportunity for an accident to happen, which can lead to a lawsuit. In addition to covering the cost of legal defense, a general liability policy provides financial compensation for damages resulting from an accident.

Nonprofits often use vehicles, either owned by the organization or by staff and volunteers, to conduct their business. Commercial auto insurance is a must for nonprofits that want to be protected against physical damage and third-party liability claims resulting from an accident involving a vehicle. It can also include coverage for theft and vandalism of the vehicle itself, as well as damage to other people’s property caused by a nonprofit driver.

Workers’ compensation is another essential insurance for nonprofits that want to protect their employees. While it is not required in all states, it can help cover medical costs and lost wages for an employee that is injured on the job. Some foundations and municipalities require that nonprofits have this type of coverage before awarding them grants.

Cyber liability insurance is another policy that all nonprofits should consider having. With so much of their business and communication taking place online, it’s crucial that nonprofits be protected against data breaches. If a hacker gains access to sensitive information, it can be financially disastrous for the company.

Crime coverage, sometimes referred to as crime bonds, is an area of nonprofit insurance that is not as well-known. Since nonprofits work with large numbers of people, they are in danger of unscrupulous individuals stealing funds or other assets from the nonprofit. This type of policy replaces the stolen money and can help prevent such events from happening in the first place.

There are other types of insurance that nonprofits should also consider, such as product liability if the nonprofit sells any products, and directors and officers insurance if there is a management team. For more advice on what type of insurance does a nonprofit organization require, talk to a specialist at CTG Insurance. Our advisors have over 40 years of experience and will help you find the right policy for your needs and risks.

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